Who is enrolling in Medicare Advantage?

An article in Kaiser Health News says:

The majority of people who signed up for Medicare Advantage plans in recent years were switching out of the traditional Medicare program, according to a recent study. The findings contradict the popular belief that growth in Medicare Advantage has been fueled primarily by people who choose it when they first become eligible for Medicare.

The study looked at Medicare Advantage enrollment between 2006 and 2011 and found that more than half of Medicare Advantage enrollees switched in from the traditional Medicare program.  The Kaiser Health News article also says:

“The prevailing thought was that baby boomers were enrolling in Medicare Advantage plans at a higher rate because they were more familiar with managed care and it was what they experienced in employer plans,” says Gretchen Jacobson, associate director of the Program on Medicare Policy at the Kaiser Family Foundation and lead author of the study.

As an insurance broker in Tucson, AZ, I have some thoughts on the study and answers to the question:  Who is enrolling in Medicare Advantage?

First of all, Tucson has a lot of experience with Medicare Advantage plans and Medicare HMOs, dating back more than 20 years.  We currently have seven companies offering 17 total Medicare Advantage plans in Pima County –  and the HMO plans are almost all $0 premium plans.

About half of my clients are enrolled in Medicare Advantage plans while the other half have chosen to stay with Medicare and get a Medicare supplement.  Most of my clients have chosen Plan F as their Medicare supplement and start out paying $148 per month.  Then they add a Part D plan at a cost between $15 and $30 per month.  Compare that to a $0 premium Medicare Advantage plan and you wonder why anyone goes the Medigap route.

Medigap is another term for Medicare supplement, and many of my clients who go this route were paying for their own health insurance before they turned 65.  Their health insurance premiums were around $500 per month for a plan with a $5,000 deductible.  With Medicare and a plan F supplement, they get 100% coverage for their medical bills for $253 per month ($104.90 for Medicare Part B plus $148 for Plan F medigap).  No deductibles, no co-pays, nada.  They see this as an awesome deal – and it is an awesome deal.

Of course, half of my clients choose Medicare Advantage because they don’t want to pay the $148 for a Plan F supplement (or $110 for a Plan N).  These clients are either:  1) very healthy, or 2) have limited income and don’t think they can afford to pay out $100 – $150 per month for a medigap plan (plus another $15 -$30 for a Part D drug plan).

This last AEP, I had 10 clients who went from Medicare Advantage back to “Original Medicare” and a supplement.  All but one of them were healthy, but worried about what the future might bring for their health and for Medicare Advantage.

One client, Tom,  had moved to a Medicare Advantage plan for January 1, 2014 after  having a medigap plan for two years.  Tom was healthy from age 65 to 66 and told me he was wasting his money on the medigap plan, so he enrolled in a Medicare Advantage plan for 2014.   Well,… he called me in November 2014 during the Open Enrollment Period and informed me that he had been diagnosed with lung cancer last summer.  Wow.  His $0 premium Medicare Advantage plan ended up costing him about $3,900 in co-pays for hospitalization and cancer treatment.  (The max out-of-pocket for his Advantage plan was $3,900.)

I told Tom that, even with lung cancer, he could go back to a Medicare supplement because he had only been in his Medicare Advantage plan for one year.  Medicare gives people a one-year trial period for Medicare Advantage and requires Medigap companies to sell people like Tom a supplement with “guaranteed issue”.  That means he gets the premium rate for his age and cannot be refused a medigap plan or “rated up” due to his health.

My observations as an insurance broker are:

  • Medicare Advantage is more popular with people with limited income. They figure they will save money with a $0 premium Advantage plan (if they stay healthy).
  • Medicare Advantage is more popular with healthy people who don’t go to the doctor often.
  • Medicare supplements are chosen by people who are “worry warts”, or planners.  They are planning for the future with the best coverage they can get.
  • Most of my turning-65 clients who chose a Medicare supplement are very healthy.
  • Because Medicare requires Advantage plans to have a MOOP (maximum out-of-pocket), these plans limit financial risk for people enrolled in them.  In Tucson, Advantage plan MOOPs range from $3,200 to $6,700.
  • Medicare Advantage plans have not yet been affected by payment cuts that are part of the Affordable Care Act.  I think this is particular to places like Tucson that have a very competitive Medicare Advantage market.

 

What Next?

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